IRS’s Retroactive Crackdown on Conservation Easements Sparks Taxpayer Backlash

Since its inception in the mid-1970s, the conservation-easement program offered tax incentives to owners who voluntarily set aside land for environmental protection, resulting in tens of millions of acres conserved. In late 2016 the IRS issued Notice 2017-10, which did not repeal the deduction but re-classified a broad class of these transactions as “listed,” subjecting them to intensive disclosure and audit requirements.

The agency then applied a presumptive abuse standard retroactively to 2010, triggering audits of over 1,100 arrangements and filing roughly 740 cases in Tax Court, with about 400 still pending. While a Senate Finance Committee investigation uncovered some abusive deals involving inflated valuations, it cautioned that most participants acted within the law. Meanwhile, a May 2026 Treasury Inspector General report revealed the IRS had back-dated penalty approvals in seven instances, conceding more than $68 million in penalties. Observers contend the IRS’s actions exceed its authority, urging Congress to prohibit after-the-fact tax changes and to provide clear guidance on legitimate easement donations.